Can I Qualify For FHA Loan With Chapter 13 Bankruptcy
This Article Is About Can I Qualify For FHA Loan With Chapter 13 Bankruptcy
Can I Qualify For FHA Loan With Chapter 13 Bankruptcy?
The answer is yes. Under HUD mortgage guidelines in qualifying for FHA Loan With Chapter 13 Bankruptcy is somewhat more complex than qualifying for an FHA loan With Chapter 7 Bankruptcy. With a Chapter 7 Bankruptcy, borrowers can qualify for an FHA loan two years from the discharge date of the Chapter 7 Bankruptcy. A Chapter 7 Bankruptcy is also known as total liquidation.
All of the consumer’s assets get liquidated and gets distributed among the consumer’s creditors. Most folks who file for Chapter 7 Bankruptcy are those who have little to no assets. In this article, we will discuss and cover Can I Qualify For FHA Loan With Chapter 13 Bankruptcy.
Chapter 7 Versus 13 Bankruptcy
There are two different bankruptcy programs consumers can qualify for:
- Petitioners get their whole debts discharged with Chapter 7 Bankruptcy
- This means that they get it wiped off
- They are no longer responsible for them anymore
- Chapter 7 Bankruptcy will give a consumer who has a lot of debts and judgments a fresh chance to start their financial life debt free after Chapter 7 Bankruptcy
- Most debts get discharged with a Chapter 7 Bankruptcy discharge which includes judgments
Debts that cannot be discharged with a Chapter 7 Bankruptcy discharge are government debts such as the following:
- student loans
- tax liens
- debts that are owed to the government
- child support payments/alimony payments
- any debts that were gotten through illegal means and/or fraud
Can I Qualify For FHA Loan With Chapter 13 Bankruptcy?
The answer is yes. The rules and waiting period are different on the qualification requirements in qualifying for FHA Loan with a Chapter 13 Bankruptcy.
Can I Qualify For FHA Loan With Chapter 13 Bankruptcy And How?
Consumers filing for Chapter 13 Bankruptcy are people who have assets:
- They need a job in order to qualify for filing a Chapter 13 Bankruptcy
- A Chapter 13 Bankruptcy is the reorganization of a consumer’s debts
- The United States Bankruptcy Courts will assign a Chapter 13 Bankruptcy Trustee
- The Chapter 13 Bankruptcy Trustee will restructure the petitioner’s debt and will take a percentage of the consumer’s income
- The trustee will come up with a repayment plan of all of the debts and creditors the Chapter 13 Bankruptcy petitioner has
- There is a payment period between 36 months to 60 months where the consumer will make the scheduled monthly payments to their creditors
- After that repayment period is over, the remaining debts are charged off and the Chapter 13 Bankruptcy Repayment Period is finally over
- The date where the whole Chapter 13 Bankruptcy repayment plan is over
The balance of the debts are discharged is called the Chapter 13 Bankruptcy Discharged Date.
Qualifying For FHA Loan During Chapter 13 Bankruptcy
Home Buyers can qualify for an FHA loan With A Chapter 13 Bankruptcy filing 12 months into entering into a Chapter 13 Bankruptcy repayment plan. This holds true as long as they have been timely with all of their scheduled monthly payments. The approval of the Chapter 13 Bankruptcy Trustee is required. Needs to be manual underwriting.
FHA Loan With Chapter 13 Bankruptcy And Is There Waiting Period
Home Buyers can qualify for an FHA loan after a Chapter 13 Bankruptcy with no mandatory waiting period after the discharged date. This holds true as long as the FHA Loan is done by manual underwriting. Any waiting period less than two years after a Chapter 13 Bankruptcy discharged date needs to be a manual underwrite. This is because the Automated Underwriting System will not render an approve/eligible per DU Findings. Any Chapter 13 Bankruptcy FHA Loans that have been seasoned less than two years after the discharge date of the Chapter 13 Bankruptcy are all manual underwriting. FHA manual underwriting guidelines will apply.
One of the requirements with manual underwrites is that rental verification is mandatory. The only way a rental verification, or also called verification of rent, is valid is by getting 12 months of canceled checks. Needs to prove rent has been paid to the landlord and/or 12 months of bank statements showing the funds going out of the renter’s bank account into the bank account of the landlord. Cannot be late on any rental payments in the past 12 months. For renters who have been renting from a property management company needs can get the 12 months of canceled check requirements waived if the property management manager can complete a VOR ( Verification Of Rent ) form, date, sign, and stamp it.
Gustan Cho Associates Mortgage Group can exempt verification of rent if renters have been living rent-free with family. Please call or text us to learn more about the VOR exemption at 262-716-8151 or text us for a faster response. Or email us at [email protected]
Waiting Period After Discharged Date
Although FHA guidelines state that there is no waiting period after a Chapter 13 Bankruptcy Discharge, there are many FHA mortgage lenders that still require a one-year or two-year waiting period after Chapter 13 Bankruptcy Discharge in order for a borrower to qualify for an FHA Loan. This is called an FHA Investor Overlay where a mortgage lender can add additional requirements on top of the minimum FHA mortgage lending guidelines. If you have been told that you do not qualify for an FHA loan after Chapter 13 Bankruptcy Discharge because you do not meet a mandatory waiting period, look no further and contact us at Gustan Cho Associates at 262-716-8151 or text for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays.